THE INSTITUTIONS OF CONSUMER LAW AND POLICY

Different bodies and institutions will have different powers and responsibilities in relation to
consumer policy. Some decisions are taken at an international, regional, national or local
level. Some bodies create the content of the law while some enforce it.

- The Consumer Landscape in the UK – A Brief Guide

o Citizens Advice (principal body for delivering consumer advice)
 Includes a Citizens Advice Consumer Service which provides advice
on issues around buying goods or services
 Government-funded provider of consumer education
 Has principal responsibility for advice, advocacy and education
o Trading Standards (in charge of day-to-day enforcement of consumer law)
 Trading Standards Specialists (TSS) work for local authorities and
undertake enforcement action at local level, and also the principal
source of consumer law education and advice for business
 Addresses national priorities through an organisation called National
Trading Standards (NTS) – in its words “our remit is focused solely
on leading investigations into trading standards offences.”
 The professional body of trading standards officers is the Chartered
Trading Standards Institute (CTSI) acts as a ‘competent authority’
for the purposes of the ADR Directive and operates the Consumer
Codes Approval Scheme (CCAS)
o Competition and Markets Authority (CMA)
 The CMA states that one of its strategic priorities is: “refocusing
consumer protection – working with… partners to promote compliance
and understanding of the law, and empowering consumers to make
informed choices.” (partners include CA and TS)
 Responsible for conducting market studies and investigations as well
as enforcing consumer protection legislation – can prosecute or take
civil action against traders for breach of the Consumer Protection from
Unfair Trading Regulations 2008 (CPUTRs)
o The Consumer Protection Partnership (CCP)
 All the organisations mentioned along with the Financial Conduct
Authority (FCA) and the Department for Business, Innovation and
Skills (BIS) make up the CCP
 “The CPP was set up to ensure coherent and strategic delivery of
enforcement, information provision and education across the consumer
landscape. The group works together to share intelligence, identify
current or future issues that are likely to adversely affect consumers
and agree priorities for work to resolve or mitigate such problems. In
essence, the role of the CPP is to ensure that partners work together
effectively and important issues are tackled and do not fall between
partners in the consumer landscape due to differing accountabilities.”
- International Institutions and Consumer Policy
o Howells et al ask whether there is such a thing as international consumer law
and state that “[i]f we take a simple model of a legal system - that is, the
existence of norms of international consumer law developed by an
international legislature and enforced by international agencies – then the
answer is that such a system does not exist.”
 o But they also recognise there are numerous factors that point to something that
might be described as international consumer law
 Soft law instruments such as international codes and the UN
Guidelines on Consumer Protection
 Extensive co-operation between enforcers (e.g. ICPEN, the
International Consumer Protection and Enforcement Network)
 Consumer advocacy at a global level provided by NGOs such as
Consumers International
- Law-Making Enforcement and Discretion
o Enforcers like TSS and CMA will have constraints imposed on what they can
do – they are not law makers, instead they apply the law created by others and
have a part in developing norms
o Parliament is the principal law-maker, but responsibility for law-making may
be delegated to a Secretary of State
o Most recent consumer protection laws have come from the UK’s membership
of the EU
o Other organisations may have the responsibility for developing norms that
play a major role in consumer law
 E.g. standardisation bodies may develop standards which are then
approved
o National legislators are generally constrained about how they can legislate –
most European consumer law is found in directives and those directives
dictate the approach taken (in order to ensure maximise harmonisation)

CONSUMER POLICY MAKING: THE STEPS

OECD’s Consumer Policy Toolkit provides a framework for the steps to be taken and the
instruments to be used

Step 1: What is the problem? The problem and the source of it is defined.
- At this point the decision maker should decide whether it is the best-placed body to
pursue the matter

Step 2: How serious is it? Quantifying the seriousness of the detriment to the extent possible.
- ‘Seriousness’ is a combination of how many people are harmed and how badly they
are harmed, possibly also who is harmed (could be physically, economically, etc.)

Step 3: Is action required? Involves an assessment of the evidence of seriousness and the
consequences of action and inaction.

Step 4: What are the options? (i.e. choice of instrument/technique)

- The decision maker has to consider the various possibilities

Step 5: What option is best? A cost-benefit analysis should be carried out; might also
consider who is affected.
- E.g. if looking at dangerous products, will take into account factors like pain and
distress involved (part of the cost)

Step 6: How effective is the policy? Monitoring the action taken to assess whether it has
worked and will work in the future.
2
CHOICES OF INSTRUMENT/TECHNIQUE
- Categorising Instruments
o There is no perfect way of dividing up the different choices concerned with
consumer law and policymaking
o Separating them into “supply-side” and “demand-side” measures
 Some instruments might be viewed as relatively market friendly
(mostly focused on helping consumers make informed choices and
hold traders to account) – the OECD views them as “demand-side”
measures as they focus primarily on consumer behaviour
 E.g. disclosure measures, consumer education and awareness
 Other instruments have more of a “supply-side” focus, concentrating
on imposing requirements on firms
 E,g, licensing, standards, prohibitions
 This distinction is not perfect – e.g. the OECD categorises consumer
terms regulation as demand when it might be viewed as supply
 Instruments such as licensing are not easily seen as “market-friendly”
since they involve controlling significantly what firms do
 Ramsay justifies laws which impose mandatory minimum
standards by saying that “the difficulties that individuals face in
making accurate risk assessments suggest that in areas such as
product safety a relatively bright line rule, eg a duty to supply
safe goods, may be socially optimal even if the consequence is
a reduction in consumer choice.”
- Choice and Risk
o Risk is inherent in making decisions about whether and how to intervene
 The International Standardisation Organisation (ISO) defines risk as
“the probable rate of occurrence of a hazard causing harm and the
degree of the severity of the harm.”
o In terms of hazards, there can be some that are known (even if we don’t know
how its caused) and unknown (e.g. in credence goods) but it is debated as to
whether products which risk financial harm should be seen as akin to
dangerous products
 After the 2008 financial crisis, Commissioner Kuneva said “we do not
rely on the good faith of traders and the alleged vigilance of consumers
but require that a regulator guarantees a satisfactory degree of safety.
Doesn’t the regulator have similar responsibilities in the market of
retail financial services? I believe we must limit the risk in retail
financial markets and exclude certain ‘toxic’ credit products from its
retail shelves.”
o Uncertainty has led to the adoption of the “precautionary principle”
o Sunstein argued that when decisions were being made about whether and how
to regulate there was broad consensus around three points or principles:
 “First, there should be an attempt to assess the magnitude of any
problem, using quantitative assessments wherever possible;
 Second, assessments of trade-offs should be made “explicitly and self-
consciously”;
 Third, tools should be used that are both effective and inexpensive
(what he refers to as “smart tools”).”

3
CHOICES OF INSTRUMENT

Attempting to help consumers to make decisions tends to be a major element in consumer

policy. As noted above, such attempts may be categorised as “demand side”, “market
friendly” or “market correcting”. It should be noted though that there will inevitably be
overlap with other instruments.

The OECD Consumer Policy Toolkit identifies twelve instruments that might be used by
authorities

1. Consumer Education and Awareness;

- Consumers International identifies the right to consumer education as one of its
eight basic consumer rights, describing it as the right: “to acquire knowledge and
skills needed to make informed, confident choices about goods and services, while
being aware of basic consumer rights and responsibilities and how to act on them.”
- Consumer education has been said to be made up of four principal elements:
o Consumer Decision-Making
o Economics
o Personal Finance
o Rights and Responsibilities
- Initiatives might be used to help consumers to make own choices by improving their
understanding of markets and products and their own circumstances
o Ensures that consumers are better-informed about their rights and so facilitate
their taking action to secure redress
- Also nudges them towards what are thought to be “better” outcomes

2. Information Provision and Other Disclosure Measures;

- “Information remedies” are among the most common types of consumer protection
instrument, which is not surprising due to information asymmetry being the most
commonly cited justification for consumer policy laws
- Addressing information deficits:
o It will unrealistic to expect to achieve “perfect information” – nevertheless, it
may be feasible to improve the supply of information so that more consumers
can have better information
 Traders will typically choose to disclose information about themselves
when it is in their best commercial interests, but framing is an issue
here
 Traders will also (possibly) choose to disclose even when it is not in
their best commercial interests to do so, but they believe it is the right
thing to do
 Occasionally, governments and regulators will use moral
suasion to persuade traders to disclose information
“voluntarily” e.g. putting pressure on a particular sector
 Traders will thus disclose information because they fear that if
they do not, they may (a) be compelled to by law; and (b)
receive negative publicity for their reluctance
- Mandatory/Mandated Disclosure
o Perhaps the simplest way of addressing an information deficit is to require
information to be provided by the party that has that information, normally

4
 with a threat of prosecution for non-compliance, but sometimes with other
consequences as well such as an extension of rights)
o Where a legal obligation is placed upon a trader we tend to refer to it as
mandatory or mandated disclosure
o According to Ben-Shahar and Schneider, mandated disclosure: “aspires to
improve complex decisions people make in their economic and social
relationships and particularly to protect the naïve in dealing with the
sophisticated. The technique is to require “the discloser” to give “the
disclosee” information to use to make better decisions, and particularly to keep
the discloser from abusing its superior position.”
o Price
 Normally relatively easy for traders to disclose and for consumers to
understand, but the law sometimes steps in to mandate that the price
must be disclosed, and determine how it should be disclosed
 E.g. the Unit Prices Directive requires that traders display
clearly the selling price of a product (including taxes) and
indicate the price per unit of measurement (subject to some
exemptions)
 Price may also be complex, might change according to the stock
market or length of time
 Comparing price could be difficult as well due to long-term contracts
 It might also be a challenge for consumers to get details of the price
offered by a range of suppliers for a range of goods (e.g. a basket of
goods’ difference in price between Aldi and Asda)
 There are TPs (e.g. websites) that can inform you but might not
be able to inform you of the quality
 Not mandated disclosure, instead a firm taking advantage of the
needs of consumers
o Terms
 One common requirement is that traders disclose to consumers
specified information (may include consumer’s legal rights as well as
specified elements of an agreement)
 E.g. regulation 3 of the Consumer Credit (Disclosure of
Information) Regulations 2010 requires specified information
to be disclosed to the borrower in good time before the
agreement is made.
 The Consumer Contracts (Information, Cancellation and Additional
Charges) Regulations 2013 also contain a variety of disclosure
obligations depending on the nature of the transaction. For example:
 Regulation 9(1) states: “Before the consumer is bound by an
on-premises contract, the trader must give or make available to
the consumer the information described in Schedule 1 in a clear
and comprehensible manner, if that information is not already
apparent from the context.”
 There is also a range of factors such as characteristics of the product,
price duration of the contract, as well as geographical address of the
retailer
o Quality
 One possible response of policy-makers is, of course, to mandate that
particular information about quality be disclosed
5
  However, there are considerable difficulties in designing disclosure
regimes which effectively communicate quality to consumers. i
identifies three in particular:1
 While some aspects of quality can be communicated
objectively, others are far more subjective
 It is easier to communicate for some goods (such as search
goods) than others (such as experience goods and credence
goods)
 Some indicators of quality cannot be communicated succinctly,
risking disclosure being complex and leading to information
overload
 One of the clearest examples of mandated regulation regarding quality
is in the area of food law
 Regulation 1169/2011 requires a range of information to be
disclosed with pre-packed food – this is relevant to safety and
quality
 Some food products made in a particular way can only be given
a particular designation
o E.g. if something is described as a “meat pie” it must
contain at least 12.5% meat
 Regulated descriptions may also relate to the origin of a
product
 Regulation 1151/2012 on quality schemes for agricultural
products and foodstuffs provides three types of quality mark
that can be applied to food products –
o “Protected destinations of origin” (food originating
from a particular geographical area where the quality of
the product results from that location)
o “Protected geographical indications” (a traditional
specialism guaranteed relates not to a geographical area
but to a method of production)
o “Traditional specialism guaranteed” (s food bearing a
TSG must follow a specified method that appears on an
EU list)
 One of the most important aspects in quality in consumer protection is
safety
 A starting point is that consumer products have to be safe (by
which we mean reasonably or acceptably safe) in order to be
placed on the market – we describe this standard of safety as a
target standard
 Regulation 7 of the General Product Safety Regulations states:
o 'Within the limits of his activities, a producer shall
provide consumers with the relevant information to
enable them-
 (a) to assess the risks inherent in a product
throughout the normal or reasonably foreseeable
period of its use, where such risks are not

1
A Ogus Regulation pp 132-133.
6
 immediately obvious without adequate
warnings, and
 (b)to take precautions against those risks.'
 This recognises that some products will inevitably present risks
to consumers and that where these are not obvious, consumers
should be informed about them so that they can assess the risks
and take precautions against them.
 We require products to be safe and take into account
information when deciding if they are.
 We also, separately, place a duty on producers to inform
consumers of risks, but we are not specifying precisely what
information has to be disclosed.
 In terms of experience goods (typically services), elements of service
quality can be disclosed
 Information relevant may be how many complaints there have
been against a firm, or how a regulator has assessed a firm in
certain regards
 In these cases, the regulator is the one who discloses (e.g. the
National Food Hygiene Ratings Scheme)
 Public bodies may be useful in helping consumers to make
comparisons because they can decide how to organise the
information in the most consumer-friendly and objective way
and may have more credibility than if firms themselves
disclose.
- Indirect Duties to Disclose
o Article 7(1) of the Unfair Commercial Practices Directive states that a
commercial practice shall be regarded as misleading is: “in its factual content,
taking account of all its features and circumstances and the limitations of the
communication medium, it omits material information that the average
consumer needs, according to the context, to take an informed transactional
decision and thereby causes or is likely to cause the average consumer to take
a transactional decision that he would not have taken otherwise.”
o Wilhelmsson argues that “a provision that deems pure omission to be unfair
under certain conditions indirectly contains a duty to disclose.”
- Strengths and Weaknesses of Mandated Disclosure
o Strengths
 Helps markets to function
 If consumers have the information they need to make an
informed choice they not only maximise their own utility (get
what they most want from their resources) but in doing so they
send clear message to traders who then have to respond to the
choices consumers make to survive
 It respects choice
 Encourages consumers to take care
 Where the state imposes licensing conditions or mandatory
standards consumers become blasé and no longer take the
care that they should.
 As it is impossible to eliminate all hazards this may,
paradoxically, place consumers at a greater risk than if those
standards were not in place.
7
  It encourages consumers, in the words of the Molony Report, to
"go shopping with their eyes open."
 Relatively cheap
 Encourages socially responsible behaviour
 Helps consumers avoid hazards that only affect certain groups
o Weaknesses or Limitations
 Does not deal well with externalities
 Where information is provided, it primarily protects the
recipient of the information
 It does little to protect third parties who might (a) not have
access to the information, or (b) be injured decided to take a
risk with a product he or she bought
 Relies heavily on the consumer to protect him or herself
 Some consumers are well-placed to access/process/act on the
information disclosed, this will not always be the case – some
vulnerable consumers are less able than others to do this
 Moreover, all consumers suffer from bounded rationality
 Difficulty for policy-makers to decide which information traders
should be required to disclose
 Different consumers desire different information, which could
tempt policy-makers to demand that traders disclose all the
information, which leads to information overload
 Easier to disclose some types of information than others
 E.g. it is generally easier to disclose accurate and useful
information about price than it is about quality
 Could result in focal point competition
 May not be as cheap as sometimes asserted
o According to Ben-Shahar and Schneider: “Although mandated disclosure
addresses a real problem and rests on a plausible assumption, it chronically
fails to accomplish its purpose, as empirical evidence about many mandates
shows.”
- Disclosing Information About the Consumer
o Sometimes a trader knows more abo0ut the consumer than the consumer
 E.g. if you want to choose which energy or mobile phone tariff would
best suit you, and a key factor in your choice is usage, your current
provider might know more about your recent usage than you do
yourself
o The Government is undertaking a programme of work called ‘midata’ in order
to give consumers access to their personal data in a portable and electronic
format (e.g. personal current account and credit cards)
 The Government has powers under the Enterprise and Regulatory
Reform Act to make regulations to make midata compulsory but has
decided not to do that owing to the "encouraging progress" that has
been made by firms on a voluntary basis.
 This might be viewed as "moral suasion" in practice.
- Regulating False and Misleading Information
o There is a general consensus that supplying false information should be
prohibited, particularly where there is fraud

8
 o It is more difficult to identify and prohibit misleading information than it is
false information because of the challenge in identifying when it is appropriate
to describe something as misleading

3. Contract Terms Regulation

- The Consumer Rights Act 2015 is now the main source of consumer contract law in
the UK
o It deals, among other things, with implied terms in contracts for goods,
services and digital content, and with the control of unfair express terms

4. Cooling-Off Periods i.e. cancellation rights

- Requires the trader to allow the consumer to cancel and agreement within a certain
time (usually combined with disclosure obligations)
- E.g. The Consumer Contracts Regulations 2013, which implement some of the UK's
obligations under the EU Consumer Rights Directive.
o Consumers who enter into (or who offer to enter into) off premises or distance
contracts have 14 calendar days in which to change their minds.
o They can do this for whatever reason they wish.
o The 14 days is the cooling off period.
- The rights do not apply to all goods, such as bespoke and customised goods etc.
o Suppose I order a replica LFC shirt with a name of the back. If it says "Feng" I
will probably not be able to cancel, whereas if it says "Klopp", I probably will
o The key seems to be whether there is a resale market.
- Cooling off periods were originally viewed as having two objectives:
o To protect consumers from high pressure selling; which might be the principal
rationale for sales that take place at the consumer's home; and,
o To allow the consumer to have more information about a product where the
contract is made at a distance and the consumer has not had the opportunity to
examine the goods
- These apply regardless of whether the product is faulty or the consumer is misled.

5. Moral Suasion
- Perhaps better understood as a way of enforcing obligations rather than an instrument
in its own right
- Can involve carrot and stick approaches, such as celebrating positive behaviour
through awards (what has been called “naming and faming” or “showing and
glowing”) or identifying poor or negative behaviour through naming and shaming
(there is an obvious overlap here with reputational sanctioning, discussed above in the
context of disclosing information about quality)

6. Codes of Conduct and Trustmarks;

- Can take many forms
- The OECD describes a code of conduct as “a set of principles and rules that govern
the way industries and institutions should behave towards their stakeholders” – could
be seen as a form of standard
- Can also be seen as playing a similar role to disclosure – principal aim is to
communicate a message to consumers
- Adherence to a code is a signal of quality: a firm is stating that it commits to being
bound by certain criteria

9
 - The communication of quality is backed up by the use of trustmarks, which involve
certifying that particular criteria are met.
o The OECD describes them as "seals (or related symbols) whose use is
approved by independent organisations for firms which comply with a
grantor's standards
o If the content of the code provides the standard, the use of a trustmark is
certification of the firms's adherence to such standards
- Sometimes codes are enforced by Government or regulators, in others by industry
bodies; sometimes they are the principal source of rules, and other times they will be
taken into account in helping decision-makers determine whether another norm has
been breached
- Examples of codes:
o Mandated self-regulation and the Advertising Standards Authority (ASA)
o Approved codes (traders subscribing to them must comply with it, and the
provisions of the code basically become terms in the contract between the
trader and the consumer)
o Third party organisations/public bodies
 E.g. Which? Trusted Traders, Approved Trader Scheme in conjunction
with Checkatrade
o Expert reviews
 E.g. Which?, Consumer Reports in the US are magazines which report
the tests of consumer products
o User generated reviews, e.g. Trip Advisor

7. Standards
- The term “standards” is not used consistently in the literature, but is commonly used
to describe: “published documents setting out specifications and procedures designed
to ensure products, services and systems are safe, reliable and consistently perform
the way they were intended to”
- They can be mandatory or voluntary, based on broad targets or detailed specifications,
and established by a range of bodies from firms to governments
- Ogus divides standards into three groups:
o A specification (or input) standard…compels the supplier to employ certain
production methods or materials, or prohibits the use of certain production
methods or materials
o A performance (or output) standard requires certain conditions of quality to
be met at the point of supply, but leaves the supplier free to choose how to
meet these conditions”
o A target standard prescribes no specific standard for the supplier’s processes
or output, but imposes criminal liability for certain harmful consequences
arising from the output
- The term “standard” can also be used to refer to almost all consumer protection
obligations.
o For example, Ramsay sees the tests for whether a commercial practice is
unfair and whether a product is dangerous (both of which we will be
examining in due course) as involving the application of standard

8. Licensing and Accreditation of Firms or Providers

10
 - The essence of prior approval is that a regulatory agency or similar body is given the
power to screen out and exclude suppliers who fail to meet minimum standards
- As well as being used where safety is in issue, prior approval can play a role in the
protection of consumers’ economic interests, for example in the area of financial
services
- Ogus notes the following characteristics of prior approval by licensing:
o Licences are issued before the regulated activity takes place
o The quality of all those engaged in the activity has to be assessed to see if they
meet minimum standards
o The conditions of the licence typically involve minimum and uniform
standards
o The ultimate sanction of prohibiting the occupation or activity is particularly
severe
o The administrative costs are high
o Significant welfare losses arise if the system is used for the anti-competitive
purpose of creating barriers to entry
- The OECD suggests that “[l]icensing can be used in industries where there is a need
to guarantee a minimum level of product quality or provide evidence of a minimum
level of firm competency”
- Licensing can be used both where economic interests are at risk, and where safety is
in issue.
o For example, firms that offer consumer credit need to licensed (or
“authorised” to be more precise) to undertake those activities

9. Financial Instruments

10. Prohibitions
- Because the law prohibits unfair commercial practices, we might also characterise the
law as involving prohibitions

11. Dispute Resolution and Redress Mechanisms (chapter 4)

12. Enforcement Strategies

- Along with moral suasion, seems to be better understood as a way of enforcing
obligations rather than an instrument in its own right

11